As more and more lenders dip their toes into the green mortgage market, energy firms remain wary about how much these loans will really help in reaching the government-set target of net-zero carbon emissions by 2050.
Mike Reynolds, managing director at Vattenfall Heat UK, thinks “doing green mortgages on their own won’t change anything without investing in the supply chain”.
He told FTAdviser: “The supply chain needs to get organised. [...] The government needs to stimulate it and initiate financiers to package in low carbon suppliers and installation services at the point of mortgage sale.”
Reynold explained “whether a consumer is buying a new mortgage or remortgage, this is the point where there’s lots of free flowing capital”, and the best time to propose a new boiler or new building fabrics.
He estimates that the average UK household is looking at £20,000 in alterations to make their homes more sustainable, in line with government targets.
“Consumers need a mechanism to make these home improvements,” Reynolds continued. “So, why not let them pay off the heating system like they would a house? Houses without these changes will be looked on less favourably in 15 years' time, which will lead to a discount on buy price if they don’t invest now.”
But a Barclays spokesperson said Reynolds’ point-of-sale model was unrealistic in the current system, and unlikely to happen anytime soon.
“It sounds nice in theory, but I doubt it’s something lenders could actually implement,” they said.
Reynolds rebutted that whilst “most people which sell things at scale like things to be simple, mortgage firms do have the data points already” to action his proposal.
Currently, green mortgages usually reward customers with cashback, or a lower interest rate if their property has a high EPC rating, said Luke Spellman, a self-employed Coventry-based mortgage broker.
Specialist buy-to-let lender Landbay and Dudley Building Society are some of the latest mortgage providers to launch green products.
They followed the government’s October-launched consultation which outlined proposals to upgrade as many homes as possible to an energy performance certificate (EPC) Band C by 2030.
Until the end of March, the government had offered homeowners and residential landlords a ‘Green Homes Grant’ voucher towards the cost of installing energy efficient home improvements.
But today, Reynolds said the lack of government subsidies meant there were “no answers for consumers”.
He cited the mass roll out of solar electricity panels on roofs, which ended up on high-income houses which could afford them and social housing due to the fact the owners - rather than the tenants - benefited from the feed-in tariffs.
“This is not how we want to do it. We will need subsidies prior to costs coming down in the supply chain.”
Ultimately, Reynolds thought two things needed to happen. The supply chain needed to reach a state of “plug and play”, where lenders and energy providers can work in tandem at the point-of-sale and the government needed to provide funding which will both subsidise consumer-led improvements, and stimulate lenders to provide finance options for these changes.
He added the narrative was beginning to change around new builds, as carbon-proofing was increasingly being seen as a way of future-proofing an asset.
Today, residential properties make up 15 per cent of the UK’s total climate emissions, according to the Office of National Statistics.
ruby.hinchliffe@ft.com
